VELEZ-MITCHELL: I`m Jane Velez-Mitchell, sitting in for Nancy Grace. Pop star Michael Jackson on the defense in a civil lawsuit in Santa Monica, California. We will play clips from Michael Jackson`s video-taped deposition for you tonight. The question, will it convince jurists he does not owe his former business associate more than $1.5 million. Let`s go straight out to "Inside Edition`s chief correspondent Jim Moret who was in court today. Jim what is the latest?

JIM MORET, CHIEF CORRESPONDENT, INSIDE EDITION: You know I was afraid you were going to come to me first. Basically what`s happened is, Marc Schaffel a former business associate of Michael Jackson`s. He`s suing Michael Jackson first for 3.8 million, that number has now been reduced to $1.6 million for unpaid receipts and various work he did. The reason the amount has been reduced and it`s been reduced in the last 24 hours is because apparently Marc Schaffel didn`t keep enough receipts to support the claim of $3.8 million owing. Basically the plaintiff`s case has rested today and the defense case is beginning. So Michael Jackson`s lawyers will get to now take the helm and produce their witnesses to say that in fact Michael Jackson not only does not owe Marc Schaffel money, but they came Schaffel owes him money.

VELEZ-MITCHELL: So it could boomerang on them. Now there are some aptly fascinating clips from the deposition that Michael Jackson gave last fall in London. It starts out with a rather dramatic encounter. Let`s take a look.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: First thing I`m going to do Mr. Jackson is let the record reflect that I`m going to hand you a subpoena requiring your attendance in trial next month in Los Angeles.

Okay. Just for the record Michael just so you know, that subpoena is ineffective.

MICHAEL JACKSON: OK, I know.

That doesn`t mean a thing. That`s just (INAUDIBLE) trying to intimidate you and throw you off. It`s the sort of thing he does. You can take this and just tear it up.

Let the record reflect that Mr. Mendell has torn up the trial subpoena I just served.

That`s right.

Where is your place of residence?

Now Bahrain.

(END OF VIDEO CLIP)

VELEZ-MITCHELL: Now this looks like something more out of a TV show or a reality show like "Punk`d" than it does a deposition. We`re going to go right out to Howard King, Marc Schaffel`s attorney, the man who is suing Jackson. I believe you were the voice there that says here`s the subpoena. Just paint a picture of what it was like, a surreal moment to hand Michael Jackson a subpoena and then have his attorney rip it up?

HOWARD KING, MARC SCHAFFEL`S ATTORNEY: Listen, lawyers do that at the beginning of depositions to try to prove who`s the biggest dog, so, we`ll see who`s the biggest dog later. But yet it was surreal. We`re sitting in a luxury suite in London and he`s there. And you know, I want him to know, just like the jury`s going to hear over and over again, you know he should be here in Santa Monica.

VELEZ-MITCHELL: And why were you not able to ultimately get him to appear in person? Because in a civil suit, theoretically, if you ask somebody, subpoena them to appear, they are supposed to appear.

KING: Well it depends on whether or not he`s a California resident. If he`s truly not a resident, he doesn`t have to honor a subpoena.

VELEZ-MITCHELL: Alright. Well that`s why we have Jackson Family attorney Brian Oxman with us tonight. Who by the way is also being called as a witness in this case. Brian, why did Michael Jackson not want to appear in Santa Monica to set the record straight, if he feels he`s done nothing wrong? Was it simply that he didn`t want to take a trip from Bahrain where he apparently was at the time, living most of the time, to Santa Monica?

BRIAN OXMAN, JACKSON FAMILY ATTORNEY: Jane, this is an accounting case. And this involves accountants. It involves checks, receipts, documents, none of which Michael really had any dealings with during the course of his time when all this took place. So his contribution to this particular matter is really very limited. And I think that`s what came out in court today. He is not the one who can tell you what happened in this case, the documents and the accounts tell you what happened in this case.

VELEZ-MITCHELL: And by the way, while we have you there, let`s try to pin you down. Where is Michael Jackson as we speak? We`ve heard that he`s shown up in Paris, we`ve heard Ireland. And that he might be moving to Europe, permanently?

OXMAN: Well the last we heard he was in Ireland and he was enjoying himself there.

VELEZ-MITCHELL: Doing what?

OXMAN: Michael just goes from place to place as he sees fit. And he does his business and meets with people as he wants to.

VELEZ-MITCHELL: Alright. But I mean was he doing an Irish jig? Was he meeting with Bob Dylan? What was going on there?

OXMAN: There was lots of discussion of him meeting with Bob Dylan. And we really don`t know whether that took place. Hadn`t heard.

VELEZ-MITCHELL: Alright. As always, a mystery. Let`s hear and see what Michael Jackson said during his deposition about this much-discussed charity album. Or charity project. What more can I give?

(BEGIN VIDEO CLIP)

Did you direct somebody to make sure that since you were disassociating from Marc Schaffel that you wanted to do it in a kind and humane matter? Manner that somebody make sure that Mr. Schaffel was reimbursed for whatever expenses he had laid out on the song "What More Can I Give"?

JACKSON: At the time, I remember juggling probably 200 different compositions in my head. Writing them, working in the middle of an album. Also visualizing short films for each song. And something like this to just be my main focus of attention, I can`t imagine, no.

(END OF VIDEO CLIP)

VELEZ-MITCHELL: Jim Moret, what is the reaction these tapes had in court? What`s the reaction of the jurors and those in the gallery?

MORET: Well sitting in this morning, one thing that struck me and Howard King did a very good job with this I thought. And that was the fact that he would ask Michael Jackson in the series of these depositions about various business relationships that he had. And Michael Jackson would invariably say he didn`t recall. And then a document would be produced and so forth. What struck me specifically about this charity project was the fact that in the deposition, Michael Jackson seemed to be saying he didn`t even know what the charity was. He just knew it was for charity. And so it would be for the good of mankind or for public awareness.

You know some things just don`t seem to make sense. Yes, we know Michael Jackson is very creative. Maybe he`s disassociated with certain business affairs on a day-to-day basis. But there would be things that would be brought up, for example, a million-dollar loan. A $2 million loan. Michael Jackson simply wouldn`t have any recollection of. And I think that for the jurors, you know, those of us who work on a normal job, that`s a lot of money. It`s hard to imagine not remembering that stuff.

VELEZ-MITCHELL: Psychologist Patricia Saunders, doesn`t Michael Jackson operate at another level? He`s an artist. He`s working subliminally. I think at the time right after he was charged in the criminal case and arraigned, he went out and jumped on his SUV and did a little dance. Which to me was sending a signal to the whole world, don`t take this seriously, it`s a big joke. Look at me, ha ha.

SAUNDERS: Because somebody shows poor judgment or acts in a weird way doesn`t mean that they`re operating in a different world or in a different plane. In fact I doubt that Mr. Jackson was able to juggle 200 compositions in his head. I read the deposition, Jane. And I saw somebody who was extremely intelligent, cagey, and thoughtful. Asking the attorney to define what he meant. Answering in very general and cautious terms. It was impressive.

DAWN: Yes. Michael Jackson is supposedly broke, where would the money come from if Marc Schaffel would win a judgment?

VELEZ-MITCHELL: Well that is an excellent, excellent question because we`ve all been wondering will Marc Schaffel ever see money, Howard King. So many people have sued Michael Jackson and walked away empty handed.

KING: Well, Michael Jackson`s actually extremely wealthy. He has no cash. But the value of his ownership in the Beatles catalog is probably worth $200 million. His real estate holdings are probably worth $20 or $30 million. God knows how many antiques and artifacts he owns. He`s a high net worth individual with no cash.

VELEZ-MITCHELL: It must have been completely surreal for you to do this deposition. When we come back, I want to ask you about what it was like to actually interview and depose Michael Jackson. Stay with us. We`ll be right back.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: Did you ever have a cash flow problem in 2003 where you wanted to spend money on something or you needed to spend money on something and didn`t have it?

JACKSON: I`d be guessing, I don`t know. 2003 -- I don`t know.

UNIDENTIFIED MALE: Have you ever had a cash flow problem in your adult life?

JACKSON: I`ve heard of some cash flow problems. But I`m not sure if it was accurate or not.

(END VIDEO CLIP)

(COMMERCIAL BREAK)

VELEZ-MITCHELL: I`m Jane Velez-Mitchell filling in for Nancy Grace. We are talking Michael Jackson who is being sued in a Santa Monica, California courtroom. And he has not appeared in person, rather on videotape via a deposition that was done last fall in London. Now part of the controversy surrounding this case involves the background of the man suing Jackson. That man`s name is Marc Schaffel. Let`s hear what Michael Jackson has to say about that.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: You learned at some point and time about Mr. Schaffel`s background and what you call gay pornography?

JACKSON: Not what I call, that`s what it was.

UNIDENTIFIED MALE: It was gay pornography?

JACKSON: Yes. I was shown a videotape by the lawyer and I was shocked at what I saw. Because I didn`t want to believe when he told me. Then he said well you have to see this. Because I was surprised that he was in that business which he never told me. And it was something that is not appropriate from what I was projecting with my work. So it just didn`t match.

(END VIDEO CLIP)

VELEZ-MITCHELL: Now, by the way for clarification. Brian Oxman, who we`ve been talking to tonight, is a Jackson family attorney. There is another attorney who actually represents Michael Jackson in the Santa Monica courtroom. And he said today, quote, I think Michael came across as sympathetic, credible and the kind of individual who could easily be taken advantage of by somebody like Marc Schaffel. Defense attorney Courtney Anderson, you have been watching and listening to this depo. Do you think Michael Jackson came across as sympathetic?

ANDERSON: I think viewed in light of the case last year, I think yes. I think last year with the resolution of his criminal trial, many people felt that he was taken advantage of by these unscrupulous people who were greedy and out to cause him harm. And I think that this case falls right in line. And I think that the deposition shows that he is busy. Maybe he doesn`t have 200 compositions that he`s working on. But maybe he has 20. And I do think he is a creative person. None of us can deny that we`re here talking about him because of what he has done with the entertainment and the music that he`s brought to the world. That`s true. So he certainly earned his status. I think that this ongoing perception of him is someone who really doesn`t understand the day to day. Who is just from --

VELEZ-MITCHELL: But do you buy that? Do you buy that? He is so smart. How could he not remember multimillion dollar deals?

ANDERSON: Obviously, with the acquittal he had last year, obviously he was taken advantage of by that family. At least that`s what the jury believed. And if that could happen to him in that situation, people came into his home and took advantage of him, then certainly I could believe in a civil jury that this, in a business situation that this person came into his life pretended to be an appropriate associate. And then Mr. Jackson is stunned to find that this man is actually involved in this kind of seedy underworld and doesn`t want to associate with him. So I think in light of the big picture, I think a lot of people are going to believe that yes, he is taken advantage of.

VELEZ-MITCHELL: Marc Schaffel`s attorney Howard King, you conducted the deposition last fall of Michael Jackson. What is it like to question him? Because he is a dancer both literally and metaphorically you might say. I mean he dances around things brilliantly. You have to say that.

KING: Well, listen, it`s like extracting teeth. But after 10 hours, I think I got all the teeth out.

VELEZ-MITCHELL: So you`re -- you think you`ve won? You think you are winning this?

KING: Well, listen, everybody thinks they`re winning their case. I think the case is going very well. I think what the jury heard today was a very cagey individual who signed document after document. And I just don`t think they`re buying that he`s some idiot savant who doesn`t know what`s going on. Especially after they heard 20 telephone messages that he left that were very lucid.

KING: Well listen, there`s no claims in the case any longer for borrowed money. I mean the cash that Marc Schaffel delivered, he`s out. He should have got a receipt, he`s an idiot. But he`s owed money.

VELEZ-MITCHELL: You`re calling your own client an idiot?

KING: He called himself an idiot on the stand for trusting Michael Jackson and not getting receipts.

VELEZ-MITCHELL: Well, we have a full screen graphic of the money that he says he is owed by Michael Jackson. Maybe we can put it up. We don`t want to get too technical here. But let`s go over it very quickly. $675,000 for the rebuttal documentaries. $340,000 for two cars delivered. $300,000 for loans to Jackson which is what we can`t talk about I guess. $200,000 for various expenses totaling $1.6 million. Now you`re saying that he doesn`t really have documentation for any of this? Because if I were to do a job, let`s say, for somebody to do a documentary on a rebuttal, I would get a contract to say hey, I`m going to do this and this is how much I`m going to be paid at XYZ dates.

KING: No, he absolutely has a contract for all of that money. He has a specific contract signed by Michael Jackson for that FOX documentary. The jury has seen it. And the only defense is going to be gee, you know, he was in mars, he didn`t know what he was signing.

VELEZ-MITCHELL: Or there were no receipts I guess, there were no cancelled checks. So he could say hey, here`s when I paid your client.

KING: Well he can`t show he paid. In fact they acknowledge he never paid that money.

VELEZ-MITCHELL: Alright so Jim Moret, chief correspondent, "Inside Edition." You`ve covered Michael Jackson for many years, you were in court today. Can you try to give us the big picture here? Because we don`t want to nitpick about every little item on this ledger. But we`re trying to get a sense of A, who`s winning. And what this whole money debate comes down to.

MORET: Look, I`ve been a lawyer long enough and a reporter long enough. It`s very difficult to give a scorecard on a day-to-day basis. It generally isn`t worth much because you know things can change quickly. I do want to bring up one point. You played that part of the deposition where Michael Jackson said he was appalled then he discovered that Marc Schaffel was in adult entertainment. And he wanted to severe all of his relationship and business with him at that point. The problem is, and it was pointed out in the deposition, that was in 2001. But in 2003 is when the rebuttal documentary, the rebuttal was made. So, you know, there`s a two-year lapse there.

Michael Jackson apparently was doing business with him long after he learned about Marc Schaffel`s past. So I think that argument is really difficult to fly with the jurors. When you really come down to it, a lot of it comes down to credibility. Who are they going to believe? Are there receipts? Sure, there are no receipts for some of the things. But if the jurors ultimately believe that Marc Schaffel is owed money, then he could win.

VELEZ-MITCHELL: Well you make a very good point. If you had somebody fired in 2001 because they were a gay porn producer, why are they working for you in 2003 and you`re leaving a whole series of voice mails on their answering machine asking them for money? I would think that that might resonate with the jury, but with Jackson juries, you can never tell, right Jim?

MORET: You can never tell. I mean many of us thought with the case last year that it could go either way. But we were frankly stunned that it went so dramatically in one direction. You can certainly analyze it in retrospect. But it`s very difficult going into a case and going forward to know what`s going to happen. This is a jury. These are 12 men and women. And they are going to go by their gut. They`re going to go by the facts that are delivered in the case. It`s just hard to predict.